942 F.

2d 702

UNITED STATES of America, Plaintiff-Appellee,

v.
James Allen RATCHFORD, Defendant-Appellant.
No. 90-6343.

United States Court of Appeals,

Tenth Circuit.
Aug. 12, 1991.

Jay F. McCown, Oklahoma City, Okl., for defendant-appellant.

Vicki Zemp Behenna, Asst. U.S. Atty. (Timothy D. Leonard, U.S. Atty.,
with her on the brief), Oklahoma City, Okl., for plaintiff-appellee.
Before McKAY and LOGAN, Circuit Judges, and BRIMMER, Chief
District Judge.*
LOGAN, Circuit Judge.

Defendant James Allen Ratchford was convicted following a jury trial of nine
counts of bank fraud and two counts of misapplication of funds, in violation of
18 U.S.C. 1344(1) and 657. The nine counts of bank fraud were in
connection with an alleged check kiting scheme and the two counts of
misapplication of funds were for an alleged diversion to personal use of moneys
belonging to a savings and loan association. He now appeals, arguing that (1)
there was insufficient evidence to support his convictions on the first three
bank fraud counts and the two misapplication of funds counts; (2) reversal is
required because the prosecutor made prejudicial misstatements in her closing
remarks; and (3) the court failed to properly instruct the jury on defendant's
good faith defense on counts four through nine.

* Defendant first contends that the government presented insufficient evidence

to convict him on the first three bank fraud counts of the indictment.
Specifically, defendant argues that his bank accounts, when combined,
contained sufficient funds on April 6, 1987, to cover the three checks that
formed the basis of counts one, two, and three.

"Evidence is considered sufficient to support a criminal conviction if, when

viewed in the light most favorable to the government, a reasonable jury could
find the defendant guilty beyond a reasonable doubt." United States v.
Culpepper, 834 F.2d 879, 881 (10th Cir.1987) (citing Jackson v. Virginia, 443
U.S. 307, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979)). Applying this standard to the
instant case, we find sufficient evidence in the record to support defendant's
convictions.

Defendant, an accountant and businessman, formed Home Management, Inc.

and three related companies in 1980: HMI Property Management, Inc., HMI
Realty, Inc., and HMI Construction Company. The indictment charged that in
January 1987, defendant began kiting checks at three different banks utilizing
the accounts of his companies, his personal account, and an account labeled
HMI Investors Trust Account; that defendant's activities continued until April
1987, ultimately causing a loss to two of the banks of nearly $50,000. Count
one charged defendant with writing a check in the amount of $4,300 on January
21, 1987, count two a check of $4,500 on February 9, 1987, and count three a
check of $4,900 on March 20, 1987, while "knowing or having reason to know
that the funds in [the respective accounts] were not sufficient to pay such ...
check[s]," in violation of 18 U.S.C. 1344(1). Indictment, I R. tab 5/9/90, at 3,
4.

The government's evidence at trial showed that on the dates the checks charged
in counts one through three were written, there were insufficient funds in the
respective accounts to cover the checks. The evidence also shows that the
covering deposits for these checks were in the form of checks written on either
the account to which the original indicted check was deposited or an account of
one of defendant's other companies involved in the float scheme. The only
argument defendant makes is that the existence of sufficient funds on April 6,
1987, negates a finding of guilt because in a true check kiting scheme, there is
never a positive balance of funds exclusive of inter-account transfers. We
disagree. The insufficient fund checks charged in counts one, two, and three
were written on January 21, February 9, and March 20, 1987, respectively. For
purposes of 1344(1), the relevant inquiry is whether defendant knowingly had
insufficient funds in the accounts being utilized on the date the checks were
written. The amount contained in those accounts on April 6 is irrelevant to this
determination.

Based on the evidence, we hold that a jury could find beyond a reasonable
doubt that defendant "knowingly execute[d] ... a scheme or artifice to defraud a
financial institution." 18 U.S.C. 1344(1).

II
7

Defendant's misapplication of funds conviction stemmed from his activities as

head of HMI Property Management, Inc. (HMI Property). HMI Property acted
as property manager for Valley Forge, an apartment complex owned by two
Oklahoma savings and loan institutions. In the spring of 1987, the apartment
complex sustained hail damage which resulted in a cash settlement from the
insurance company. Defendant diverted $8,800 of this settlement to his
personal account, using the money to pay his charge card debt. HMI Property
never repaired the damage to the complex.

Defendant argues that the evidence was insufficient to convict him of

misapplication of funds under the language of 18 U.S.C. 657. Specifically,
defendant contends that at the time he procured the funds from the insurance
settlement, he was not "connected" with a federally insured institution as
required by 657. Defendant argues that his only connection was with First
Capital Mortgage, the loan servicer for the two savings and loans, and that this
contact is too remote for purposes of 657. We disagree.

Section 657 imposes criminal liability on any "officer, agent or employee of or

connected in any capacity with" a savings and loan who embezzles or willfully
misapplies any money or funds belonging to such institution. 18 U.S.C. 657
(emphasis added). In the instant case defendant was connected to a savings and
loan through his association with First Capital, who employed his company to
manage an apartment complex owned by two Oklahoma savings and loans.1 As
president and owner of the managing company, defendant was aware of the
savings and loans' ownership of the complex and that his ultimate responsibility
was to these owners. It was in this position of trust that he diverted funds he
knew belonged to these institutions to his own personal use. The check
defendant diverted in part to pay his personal charge card debt was made out to
"OK Federal S & L DBA Valley Forge Apts C/O Jim Gladney, Home Mgmt
Inc." Addendum Exhibits of Appellee's Brief at 77 (ex. 65). Jim Gladney signed
the check for Home Management, Inc. and turned it over to defendant. III R. at
257.

10

Although each case is fact specific, the courts have given a broad interpretation
of 657 to effectuate congressional intent to protect federally insured lenders
from fraud. See United States v. Prater, 805 F.2d 1441, 1446 (11th Cir.1986). "
'In cases where the defendant is not directly employed by the insured bank,
courts have focused on the relationship between the employing entity and the
bank's business in deciding whether there is a sufficient "connection" for
purposes of the statute.' " Id. (quoting United States v. Fulton, 640 F.2d 1104,

1106 (9th Cir.1981)). See also United States v. Harris, 729 F.2d 441, 445 (7th
Cir.1984) (employees of state agency receiving 60% of operating funds from
HUD, working on 100% HUD funded project, are "connected" to HUD
sufficiently to support conviction under 657). Given the facts of the instant
case and the broad interpretation normally afforded 657, we conclude that
defendant was sufficiently connected with an insured savings and loan
association to support his convictions for misapplication of funds belonging to
it.
III
11

Defendant next argues that the prosecutor made prejudicial misstatements

concerning the law and evidence during her closing argument. In his brief,
defendant identifies four false and misleading remarks by the prosecutor that,
even though he failed to object, require reversal of his conviction under the
plain error rule.

12

In cases involving a failure to object, Rule 52(b) of the Federal Rules of

Criminal Procedure authorizes a court to review the evidence or statement for
plain error. The plain error doctrine of Rule 52(b) "tempers the blow of a rigid
application of the contemporaneous-objection requirement." United States v.
Young, 470 U.S. 1, 15, 105 S.Ct. 1038, 1046, 84 L.Ed.2d 1 (1985). "The Rule
authorizes the Courts of Appeals to correct only 'particularly egregious errors,'
those errors that 'seriously affect the fairness, integrity or public reputation of
judicial proceedings.' " Id. (citations omitted). Rule 52 should be " 'used
sparingly, solely in those circumstances in which a miscarriage of justice would
otherwise result.' " Id. (quoting United States v. Frady, 456 U.S. 152, 163 n. 14,
102 S.Ct. 1584, 1592 n. 14, 71 L.Ed.2d 816 (1982)).

13

Defendant points to the following four statements and corresponding evidence

in support of his arguments:

First misstatement of the evidence:

14

"There are some other facts in this case that are undisputed and that is that the
defendant overdrafted his account and he knew the account was overdrafted
and he went to Mustang Bank to try to get a loan to cover the overdraft
situation."

V R. at 599.
15
Corresponding Evidence:

16 [by prosecutor]: The money [from the loan] was to cover overdrafts, wasn't it
"Q
Mr. Ratchford?
17 Not at the time we applied. Not at the time that we had our first meeting and I--or
A:
I thought that the loan had been approved. We issued checks only in the belief that
we would have the loan and would have the funds coming in and our issuing checks
on that belief is what created the overdraft."
Id. at 526.
18
Second misstatement of the evidence:
19
"[Defendant]
was trained in school at OSU to identify a check kite. He was trained
as an auditor for Pete Marwick [sic] to know what check kiting was."
Id. at 605.
20
Corresponding Evidence:
"Q [by Prosecutor]: And you know what check kiting is?
21
A [by Defendant]: I have a general idea.
22
Q: Were you not taught that in school?
23
A: Not to my recollection.
24
Q: Were you not taught that as an auditor at Pete Marwick [sic]?
25
26 Not specifically.Q: Was it not one of your jobs to identify kiting procedures in ...
A:
your customers accounts?
A: No, ma'am."
27
Id. at 519.
28
Third misstatement of the evidence:
29

"Does he ever address to you, does he ever explain to you once what that
money [from the insurance settlement] was used for, why he felt he was
entitled to that money? He doesn't because there is no explanation for it."

Id. at 621.
30
Corresponding Evidence:

31
Several
times during trial, defendant testified that he was entitled to the money
pursuant to his property ownership. IV R. 352, 447, 459, 460; V R. 574-75.
Misstatement of the law:
32
"Ladies
and gentlemen, in order for you to find the defendant not guilty in this case,
you're going to have to disbelieve the testimony of three bank officers, two FBI
agents, two employees and a vice president of a savings and loan, OK Federal
Savings & Loan. I submit to you, ladies and gentlemen, that those individuals were
not mistaken about what occurred. They were not mistaken about their recollections
and their conversations with the defendant. They have absolutely no reason to come
to you during the course of this trial and tell you anything but the truth."
V R. at 606-07.
33
Corresponding Law:
34
"[E]ven
assuming the testimony of the Prosecution and Defense witnesses contained
unavoidable contradiction, it of course does not follow as a matter of law that in
order to acquit [the defendant] the jury had to believe the agents had lied.... [T]o tell
the jurors that they had to choose between the two stories was error."
United States v. Vargas, 583 F.2d 380, 387 (7th Cir.1978).
35
36

We are satisfied that these statements of the prosecutor did not rise to the level
of plain error. The prosecutor's comments on defendant's loan application and
knowledge of check kiting were within the range of reasonable inferences that
could be drawn from the evidence. See United States v. Manriquez Arbizo, 833
F.2d 244, 247 (10th Cir.1987). The record shows that defendant's account was
overdrafted when he applied for the loan and that accountants of similar
background and training were instructed on the nuances of check kiting. We
also see nothing misleading about the prosecutor's statements on defendant's
use of the insurance settlement. Finally, although it may have been error for the
prosecutor to tell the jury members that they had to disbelieve several witnesses
before they could acquit defendant, see United States v. Vargas, 583 F.2d 380,
387 (7th Cir.1978), this comment was not so prejudicial as to require reversal.
The record contains substantial evidence apart from this remark to support
defendant's convictions. Furthermore, the trial judge instructed the jury that the
arguments and statements of counsel are not evidence, that they could reject
even uncontradicted testimony, and that they are the sole judges of the facts.

IV
37

Finally, defendant argues that the district court did not properly instruct the jury

37

Finally, defendant argues that the district court did not properly instruct the jury
on his good faith defense to the bank fraud charges. He contends that the court
should have included in its instruction the following statement: "Defendant's
belief that he was acting in good faith need not be rational nor reasonable if
Defendant's beliefs were truly held." Appellant's Brief at 12. 2

38

A defendant is entitled to an instruction on a theory of defense if it is legally

sound and supported by the evidence presented at trial. A trial judge, however,
"is given substantial latitude and discretion in tailoring and formulating the
instructions so long as they are correct statements of law and fairly and
adequately cover the issues presented." United States v. Pack, 773 F.2d 261,
267 (10th Cir.1985) (citation omitted). Applying this standard to the instant
case, we are satisfied that the district court did not err in instructing the jury on
defendant's good faith defense. Under the court's instruction, the jury was
informed that a defendant acting upon an honest opinion or belief is not
chargeable with fraudulent intent even if his opinion is erroneous or his belief is
mistaken or wrong. This instruction is an adequate statement of the law, see
United States v. Cronic, 839 F.2d 1401, 1403 (10th Cir.1988); United States v.
Hopkins, 744 F.2d 716, 717-18 (10th Cir.1984), and sufficiently broad to
include even beliefs not rationally or reasonably held.

39

AFFIRMED.

The Honorable Clarence A. Brimmer, Chief Judge, United States District Court
for the District of Wyoming, sitting by designation

First Capital, as loan servicer, was responsible for taking in principal and
interest payments and disbursing them to the mortgage holders of the property.
A loan servicer performs this task in the same manner as would a savings and
loan. IV R. at 289

The district court instructed the jury as follows:

"The defendant states that he acted in good faith and that he did not intend to
defraud any of the financial institutions in question, or anyone else. Good faith
is a complete defense to the charges in the indictment, since good faith on the
part of the defendant is inconsistent with intent to defraud or willfulness which
is an essential part of the charges. The burden of proof is not on the defendant
to prove his good faith, of course, since he has no burden to prove anything.
The government must establish beyond a reasonable doubt that the defendant
acted with the specific intent to defraud as charged in the indictment.

A defendant who acts upon an opinion honestly held by him at the time of the
alleged acts, or pursuant to a belief honestly entertained by him at the time of
the alleged acts, is not chargeable with fraudulent intent even though his
opinion is erroneous or his belief is mistaken or wrong. Similarly, evidence
which establishes only that a person made a mistake in judgment or an error in
management or was careless, does not establish fraudulent intent. In order to
establish fraudulent intent on the part of a person, it must be established that the
person knowingly and intentionally intended to deceive another.
On the other hand, the defendant's good faith must have existed at the time the
alleged unlawful acts were committed. One cannot assert good faith as a
defense if the opinions or beliefs advanced as justifications for the good faith
defense were formulated after the commission of criminal acts.
Good faith does not mean a hope that money obtained pursuant to a scheme to
defraud will eventually be put back.
It is for you the jury to determine whether the defendant truly held the beliefs
or opinions in question at the time of the alleged acts. Moreover, it will be for
you, the jury, to determine from all of the facts and circumstances appearing
before you, if the government has established, beyond a reasonable doubt, that
the defendant had the requisite state of mind in connection with the alleged
offenses."
I R. tab 59, inst. 20-A.